Belarus-China Relations: More Hype than Substance?

On 10-12 May, Chinese president Xi Jinping capped off his Eurasia trip with a visit to Minsk. As during his prior stops in Kazakhstan and Russia, the Chinese leader was sizing up the opportunities, as well as the risks,...

Image: Belta.by

On 10-12 May, Chinese president Xi Jinping capped off his Eurasia trip with a visit to Minsk. As during his prior stops in Kazakhstan and Russia, the Chinese leader was sizing up the opportunities, as well as the risks, of deepening ties with countries in the Eurasian Economic Union.

Over the past two decades, Belarus has achieved a high level of confidence in its political relations with China, mainly through international support for China's policies. Squeezed between the EU and Russia, Belarus has sought to strengthen ties with a third power to gain greater independence in its foreign relations. However, economically speaking, Belarus has little to offer to China other than potash fertilisers.

A "Historic" Visit to Belarus

When Xi's presidential plane landed in Minsk, the Belarusian media was quick to call the visit “historic,” marking a new epoch in Belarus-China relations. No high-level Chinese leader has visited Belarus since 2001. Needless to say, President Lukashenka personally greeted and saw off President Xi at the airport.

The countries signed a number of agreements, which include Chinese investment in Belarusian railroads, industrial enterprises, and Big Stone, a Belarusian-Chinese industrial park. The Chinese leader also suggested that Belarus participates in China’s New Silk Road, an ambitious project to upgrade the transport and communications infrastructure connecting China to Europe.

Among the usual diplomatic niceties about friendship and cooperation, Xi commended the important role Lukashenka has played in working toward peace in Ukraine, “which was highly praised by the international community."

Of course, Xi was not in Minsk simply to compliment to Lukashenka.

Aliaksandr Filipaŭ, a former Asia analyst at the Presidential Analytical Centre in Minsk, told Belarus Digest that Xi Jinping had a few hidden items on his agenda.

First and foremost, he was examining how trade integration was proceeding under the Eurasian Economic Union between Kazakhstan, Russia, and Belarus, and whether China stands to gain or lose from it.

Xi also wanted to assess whether the economic downturn in Belarus might harm the projects that China has financed through export credits. Not least, Xi was eager to secure long-term contracts at cheap prices for Belarusian potash fertiliser, a critical input for China's large farm sector. China is the world's top consumer of agrochemicals and potash fertilizer. China is even exploring the possibility of acquiring Belaruskali, Belarus's potash extraction and export giant.

From Minsk's perspective, Xi’s visit afforded a unique opportunity to show that Belarus can successfully pursue a "multi-vector" foreign policy, and that it has the stature to host world leaders. In particular, Lukashenka seeks to demonstrate to Belarus's neighbouring powers, Russia and the EU, that his country can increase its room for diplomatic manoeuvre. All the while, the government prevented the Belarusian media from publishing any critical analysis of China's commercial contracts and interests in Belarus.

High Politics and Poor Business

Despite a long history of mutual visits, it was only after 2006 that China became a foreign policy priority for Belarus. At the time, Russia announced its plans to significantly raise the price of oil and gas exports to Belarus. China was fast becoming a global superpower and an alternative partner to the West, making it the most suitable candidate to balance Russia's influence.

China was reluctant to engage Belarus economically because of the country's Soviet-style management culture and lack of a market economyRead more

To draw the Asian power’s attention, Belarus actively supported the One China policy, as well as other Chinese policies, in the international arena. China returned the favour by condemning interference in Belarus’ internal affairs, in the face of Western critics of Lukashenka’s undemocratic politics.

Another goal of cooperating with China, to receive ample investments and cheap loans, proved far more difficult to achieve. Adhering to a pragmatic foreign policy, China felt it was enough to offer political support to Belarus. Chinese diplomats apparently told their western colleagues in the mid-2000s that they were reluctant to engage Belarus economically because of the country's Soviet-style management culture and lack of a market economy. To this day, Chinese FDI in Belarus remain very low, a sober reflection of China's lukewarm attitude.

Belarusian media like to report huge figures for Chinese loans, and often misconstrue them as "investments." The reports never mention that most of these deals originate with the Export-Import Bank of China, which offers export financing for Chinese goods and services. Under the terms of such loans, the general share of Chinese equipment, works and services is to be no less than 50% of the value of project financing. Such projects may modernise Belarusian industry, but they raise many questions in terms of economic expediency.

For a long time, Belarusian official propaganda has exaggerated Belarus’ importance for China, referring to Belarusian-Chinese relations as a "strategic partnership," the highest level of relations in the hierarchy of Chinese foreign policy. However, the Chinese themselves agreed to this formula only in 2013. According to a 2007 cable leaked out of the US Embassy in Minsk, Chinese Deputy Ambassador Jiang Xiaoyang described Belarus-China relations as having “more hype than substance."

The false image of cooperation largely targets a domestic audience, as well as constituting a veiled threat to Russia that Belarus is capable of establishing alternative alliances.

Does Belarus Have Anything to Offer China?

The problem for Belarus in its relationship with China is that it cannot offer any significant projects for investment. Lukashenka has promoted his country as a gateway to both the Eurasian Economic Union and the EU, but this rhetoric lacks practical meaning. China established strategic partnerships with the EU and Russia long before Belarus and has external trade turnover of around $500 billion with EU and $90 billion with Russia, but only $4 billion with Belarus.

But Chinese companies remain reluctant to invest in Belarus because of its poor business environment and Soviet-style management culture, and the actual level of Chinese FDI in Belarus remains extremely low.

Although the Belarusian media has reported billions of dollars worth of contracts, the reports fail to mention that China only offers loans and investments that are tied to procurement of goods and services from China.

According to Filipaŭ, Belarus currently has nothing to offer China but potash. Conversely, the New Silk Road, which Xi has offered Belarus to join, hardly concerns Belarus at all. It primarily targets the development of China's western regions, and its economic feasibility remains in doubt.

The Big Stone Industrial Park, the largest and most promising joint initiative, risks faltering due to red tape and poor management. Technologically, Belarus lags decades behind China. There may be room to cooperate on military technology, but both countries receive much of this technology from Russia already.

Belarus needs China's help across the board – diplomacy, capital, and technology. China is beginning to oblige, but will move forward with caution. In the meantime, a niche area for bilateral cooperation is in information technologies that facilitate government control. As its recent actions show, Minsk is prone to control and censor the Internet. More likely than not, China, a fellow authoritarian regime, will be happy to share its ample experiences in digital repression.

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19 May 2015

Minsk Dialogue Non-Paper: Another Yalta is Impossible

The organisers of the Minsk Dialogue conference in Minsk (Liberal Club and the Ostrogorski Centre) released the non-paper timed for the Riga Eastern Partnership Summit which will take place in Riga on 21-22 May 2015.

The non-paper results from intensive discussions between experts from European Union, Russia and Eastern Partnership countries in Minsk and subsequent due diligence efforts.

The non-paper starts by analysing the reasons for the regional divide in the European Union and Russian shared neighbourhood, discusses the reasons why communication between major regional actors failed and the need for new channels of communication in the region bases, including increased communication on micro-level and within the expert community.

Regional Divide: Nature and Challenges

1. The post-Soviet fragmentation poses numerous regional risks, which are daunting against the background of the geopolitical escalation in Eastern Europe.

2. Lack of communication across dividing lines, between the West and Russia, further strengthens the pre-exisiting deficit of trust among regional actors and stakeholders. As a result, all the relevant actors place the Ukraine crisis in their own domestic contexts, often without taking into account the bigger picture.

3. The Eastern Partnership, in contrast to the European Neighbourhood Policy, was originally perceived by Moscow as a project that threatens Russia’s interests. With the progress of the association negotiations between the European Union and several partner countries, the Eastern Partnership acquired the character of a geopolitical struggle. After this, conflict became unavoidable.

4. The geopolitical struggle already turned into the driving force behind the accelerated Eurasian integration. As a result, in less than five years the project formally passed through three stages: from a customs union to a common economic space to an economic union. However, a number of fundamental issues remained unaddressed in the course of the integration process. In particular, the identity problem – on what values does the Eurasian integration rest? – has been neither discussed nor resolved. Technically speaking, of the four economic freedoms that the European Union espouses, only one of those – free movement of labour – fully operates in the Eurasian Economic Union.

5. As the European Union example suggests, true economic integration only works when countries pool sovereignty. In the case of the Eurasian Economic Union, integration institutions such as the Eurasian Economic Commission are dominated by Russia and important decisions are made at the national level. Due to these and other internal factors the Eurasian Economic Union has almost exhausted its potential for further enlargement.

6. Integration projects in the ‘shared neighbourhood’ (both EU- and Russia-driven) remain elite-centric. Thus, they lack societal cohesion and cause fragmentation at critical junctures. At the same time, recently societies in countries with more liberal political regimes have emerged as a new factor in international relations. However, their role (and relations) with traditional political and diplomatic actors remains uncertain.

7. Under these circumstances, a choice between the East and West inevitably brings conflict and further polarizes societies in the shared neighbourhood.

8. The integration rationale of the ‘in-between’ countries is based on the idea of integration advantages (natural and financial resources, beneficial trade, and modernisation opportunities, etc). Ultimately, the states in the shared neighbourhood fear a USSR-like situation: domination of the centre without sufficient resources.

9. The role of the United States in the ‘shared neighbourhood’ is heavily exploited in propaganda but insufficiently addressed in diplomacy. A sustainable solution to the crisis requires an active engagement of all actors – EU, Russia, United States and the countries in question.

Bridging the Divide: Track-I

10. Quick solutions to the problem of geopolitical escalation in Eastern Europe are unlikely to succeed, as regional tensions remain high and warring states are still determined to fight for their cause. Therefore, stopping hostilities in Donbas is of the utmost priority. No political settlement in Ukraine and in the region at large is possible beforehand.

11. Countries in the ‘shared neighbourhood’ should be important players on all matters of crisis resolution and post-crisis regional settlement. Small countries have levers and abilities to block some of the Great Powers’ decisions. Hence, “another Yalta is impossible”.

12. To be both viable and attractive, regional integration projects need to fit into the constellation of international relations in eastern Europe that will emerge after the Ukraine crisis. At a minimum, they need to avoid strengthening dividing lines and provide the ‘in-between’ states with enough space for geopolitical and geo-economic complementarity. In the case of the Eastern Partnership, a double-track approach is emerging, as Georgia, Moldova and Ukraine have effectively formed an ‘association league’. But the other three EaP countries – Armenia, Azerbaijan and Belarus – should not be isolated.

13. A sustainable security area in the shared neighbourhood cannot be built without Russia. Nor can Ukraine’s economic problems be effectively addressed in the short term without Russia. Therefore, the European Union ignoring Moscow and vice versa is not helpful. Long-term regional solutions need to reflect the reality on the ground and incorporate decision-makers in the regions as well.

14. Confidence-building among regional actors and stakeholders is key to de-escalation in the shared neighbourhood. Intensified communication across dividing lines with a focus on technical, rather than geopolitical, issues should be prioritised.

15. The concept of a ‘Greater Europe’ from Lisbon to Vladivostok remains abstract, as it is not clear how conceptually valid it is without resolving the intractable Crimea problem. However, the idea of modernisation in the framework of a common economic area has potential to become a common denominator, but only in the longer run.

16. Depoliticised technical discussions about prospects for a common economic area between the European Union and the Eurasian Economic Union need to begin as confidence-building exercises and a contribution to future stability. They should not focus on the macro level only. The micro level (local and district public administrations, businesses, local communities, cross-border cooperation etc.) is of crucial importance. Economically at least, the questions remain the same anyway: rule of law, quality of infrastructure, customs practices, administrative efficiency, business climate, etc.

Bridging the Divide: Track-II

17. Against the backdrop of existing dividing lines and growing geopolitical escalation, a track-II dialogue is a crucial channel of communication and another pillar of confidence-building among actors and stakeholders in the region.

18. Minsk has demonstrated itself to be a suitable venue for such a dialogue due to its newly established status as neutral ground for negotiations to resolve the Ukraine crisis. It has the clear potential to attract experts from all countries in the region and has now been proven “fit” to host discussions about relations between the European Union and the Eurasian Economic Union – due to precedent, and perhaps more importantly, due to its unique status as an original member of both the Eurasian Economic Union and the Eastern Partnership.

19. A track-II platform in Minsk (the “Minsk Dialogue”) should organise regular meetings with a view to facilitating inclusive discussions about prospects, rather than focusing on the status quo and present-day positions of regional actors.

20. The issue of protracted territorial conflicts in the shared neighbourhood (including lessons from the older conflicts in the post-Soviet space for the Donbas crisis) should be a priority for future Minsk Dialogue meetings, especially given Minsk’s other role in the Nagorno-Karabakh conflict (the “other” “Minsk Group”). A technical dialogue between the European Union and the Eurasian Economic Union would be another priority, only with a longer-term perspective.

This non-paper is the result of the inaugural conference held in Minsk on 26-28 March 2015. The Minsk Dialogue is a joint initiative by two Belarusian think-tanks – the Liberal Club and the Ostrogorski Centre – that aims to create a Track-II platform to address the most challenging international issues in the ‘shared neighbourhood between the European Union and Russia. The Minsk Dialogue undertakes regular expert gatherings and publications to offer up-to-date policy advice for fostering cooperation across existing dividing lines.